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tv   Squawk on the Street  CNBC  September 14, 2015 9:00am-11:01am EDT

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students in those schools received $2.2 billion in federal loans last year. our 20th anniversary celebration continues tomorrow. we'll have a conversation on the future of college education with administrators from georgia town, arizona state, also former senator bob kerry. >> that's tomorrow. join us for that. "squawk on the street" is next. don't say it, we'll sound old. >> good morning. welcome to "squawk on the street." i'm carl quintanilla, with michelle car ruuso cabrera join us. the bulls will try to build on the do youw's best week. europe is having a slightly better session. we'll watch bonds, the short
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end, for clues about the fed's move. yie oil is relatively flat. apple shares higher in the premarket after the company says new i phone preorders are on pace to beat last year's record. >> the final countdown to the fed and mixed data out of china investors bracing for another week of opportunity. >> and alibaba firing back after barron's says the stock could fall another 50% from here. >> apple is one of the stories of the morning. they come out with not hard numbers, but a characterization of how opening weekend went. very strong, in their words, globally and on pace to outdo last year's preopening weekend. >> these are preorders, not in stores yet. >> not yet. >> a lot of industry data we have is based on inventory. i can't remember what happened
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last time when you had the 6 and the 6s launched if those were i ventory challenged or not. >> apple said, listen, we know some customers have noticed how long the preorder window is it's three to four weeks at this point in some countries. we're trying hard to match that demand. that suggest that. what they said today met what tim cook told jim cramer. that was an important hurdle for the stock. >> tim cook will be on colbert tuesday. we'll get more this week. josh lipton has been covering this story for the past 30 minutes after the statement broke. he joins us from out west. hey, josh. >> carl, this morning apple, as you guyses weuys were mentionin us indication to customer response to 6 and 6s plus.
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they say customer response to iphone 6s and 6s plus have been extremely positive and preorders this weekend were very strong around the world. we are on pace to beat last year's 10 million unit first weekend record when the new iphones go on sale. last year apple said they received more than 4 million orders for the 6 and 6 plus in the first 24 hours. apple is saying what preorders indicate for the first weekend of sales, but clearly the tech giant sounding a bullish note and looking for a new record. it's the real question for investors, will these new iphones be faster, camera, better camera pressure sensitive display, shooting 4k video? will that grow units going ahead? bulls think they can. the price cuts to the older models they think will give iphones a lift in the emerging markets. >> speaking of which, china's
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27% of sales, a story over the weekend suggesting that they're selling out over there. any clarity specifically on china? >> no clarity specifically on china in the release this morning. you're right to point that out. when i talked to bulls like gene munster, he was saying he was looking for a strong preorder this year in part because it involved more launch countries. two more specifically, one new zealand and one china. that was a big part of the bull thesis. >> we'll see what happens. thank you, josh. we'll hear from you later. stock had a nice week last week, up 4%. one of the best components on the dow after we came out of the event in san francisco. >> a lot of us were sitting on the beach -- >> you were sitting on the beach last week. >> but i was reading about apple that trades 11 times earning, 9 times earning if you strip out the cash. that argument if you can prove you have decent growth in there
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backs a valuation story. josh raises the point here that the original 6 and 6 plus are not $100 cheaper. for an awful lot of people in the market, that will push volume, if not margin. >> what i found interesting is that we focus so much on the new products. we love the new products. a lot of us are early adopters. but the pricing scheme, the ability to rent and get a new phone every year, you know, when you look at the analysis of what apple can resell that used phone for which is still pretty new. there's estimates they can sell that phone for 175 bucks, which is a very high price for a used phone. >> yeah. >> your margins can go up dramatically. the bull case on this stock often has to do -- in this case has do a lot with the new pricing model. not just the new phone itself. >> let's talk about the market overall. futures are off their highs. obviously the fed meeting later this week. that looms large for virtually everybody around world. the watch is on to see if fed chair yellen and policymakers
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will start hiking rates for the first time since 2006. in china, the shanghai had its biggest deficit in three weeks. what is interesting to where your trading live in europe and what you see on the futures here, we seem relatively immune from the china story. >> which is so unlike -- >> which is not where we were three, four weeks ago. >> it's hard to say why on one day when china gets, you know, sneezes, the whole world catches a cold, on other days it doesn't. part of it is increasingly -- i'm not sure anybody believes the numbers out of china. there was a "wall street journal" poll where they looked at analyst expectations about chinese growth, the vast majority say we don't believe what china says. >> yet you still have that central defense from where we
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were three, four weeks ago as to why the markets fell so violently, across so many sectors. i guess it comes down to that argument about trading algorithms, and a point in time of trading. >> maybe the markets have grown comfortable with the idea that china is not growing as fast as everybody thought. >> we repriced. >> hard to say at this point. we have to see the ripple effects. >> for more on the markets, joining us now is ward mccarthy and brian jacobson. ward, let me start with you. what do you think about simon's question? why today do we get these terrible numbers out of china -- terrible is overstating it, but weak. yet u.s. markets seem to be shrugging it off. >> i think you have to look at three different types of reactions to china. the first is the effect on the u.s. economy, which is pretty minimal. in the long-term, you know, if china continues to struggle, the
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u.s. economy will continue to do well. the very short-term china does clearly have links to the volatility in the u.s. markets. because the longer term implications are not so severe the u.s. stock market is shaking that off. the last effect is on the inflation side. china has a very strong impact on commodity prices. and of course commodity prices have been falling which makes it difficult for the u.s. to generate any type of inflation, which is a headache for the fed. >> brian, are you as sanguine about the impact of china on the u.s.? >> i'm not sure if i would describe myself as sanguine about it, but i'm not that worried, mainly because i don't think a lot of people believe the numbers coming out of china for a long time. but they are of symbolic significance if suddenly the
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leadership allows some of the economic data points to come in below target for a sustained period of time, that might signal a shift of longer term policy. i think most investors who are looking at getting into china should do it more on the basis of the long-term outlook, and not the short-term. if in october, if they announce they will be backtracking on some market reforms, i would say now it's time to get out of china. >> what about the u.s.? i'm talking about the united states. when china is acting the way it's been acting what do you tell the u.s.-based investor about what -- how they should be reacting within the portfolio? >> that's a good point. most people don't have a lot of china exposure. whether directly or indirectly. you can see some rather dramatic moves in the u.s. markets on the basis of short-term news coming out of china. over the long-term, if you look at exports from the united states to china, it maybe amounts to 2% of gross domestic
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product or 1%. that's not to say it's not incredibly important for some companies. as you were pointing out before at top of the show, the discussion about apple as far as the growth in sales to that market that could be important to some companies. but for the broadly diversififi u.s. exposure, it's not that significant. >> let's talk about the major event of the week, what the fed will do. will they start raising rates for the first time in 11 years. it seems to be we reached a stage where we're kind of at it's a coin toss. if you look at what everybody is saying. it's a coin toss as to whether or not they move. are you able to judge if they were to move and communicate clearly that they're not going to raise rates fast, what the effect would be on the market? are we positioned for it now or as some people suggest could we fall out of bed in emerging markets? others say we'll rise what do you think? >> as far as the u.s. is concerned, there's really just
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mass confusion as far as what the fed will do. in the short-term, it could add to the volatility that we've already seen. though i think in the longer term, again, because the u.s. economy is on solid footing, that the u.s. stock market will be able to shrug it off and continue to perform pretty well. but i think that, you know, i tend to look at the feds dual mandate as an indication as what they'll do the u.s. economy does not require emergency rates any longer but the inflation picture is muddled and the volatility is a concern. >> brian, just finally before we leave, what was an interesting comment out of london from jpmorgan, they were suggesting this could be positive for the stock market because they -- we will have a clearer idea if the fed is in favor of risk assets, either because they'll delay or raise and make it so clear they won't raise so soon that people will say the fed has got this. the fed is on the side of risk
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assets. could you go along with that? >> i think that's part of. it's one piece of the puzzle. >> brian, if you would. >> i would say if the fed hikes we could see the market move down to around 1840. i don't think that's positive for risk assets. fed policy is like a double edged knife it cuts both ways. i think if the fed signals they'll have a press conference after every meeting going forward, that way it puts october into play, it would give them the possibility of postponing the rate hike. that would be positive for risk assets. if they decide to hike, i'm not convinced the markets are properly positioned for that. >> all right. so sanguine or sanguine. thank you, brian. >> ward and brian, thank you. we wait this big fed meeting later this week. when we come bashck, alibab shares in the red after barron's says the stock could plummet 50%. alibaba fighting back.
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and mohamed el-erian coming up. more "squawk on the street" coming up. at mfs investment management, we believe active management can protect capital long term. active management can tap global insights. active management can take calculated risks. active management can seek to outperform. because active investment management isn't reactive. it's active. that's the power of active management.
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alibaba shares falling after barron's said over the weekend that the stock could fall 50% from current levels, citing the china slow down, e-commerce competition and scrutiny over the company's culture governance. alibaba released a letter saying the story contains factual inaccuracies and selective use of information and the conclusions he draws are misleading. we are talking about basic disagreements on what year a multiple applies to, whether or not a survey of market share is statistically relevant. >> so a letter to the editor understates is. it's five pages, detailed. alibaba had to come back with a strong response. when you read this article, the journalist never uses the "f"
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word, fraud. but, boy, he sniffs around it a lot. he doesn't call jack ma a liar, but he gets awfully close. the response is flimsy. seeming improbability of the growth numbers. financial reports that have broken free of verifiable reality and reached a velocity that doesn't comport. they get close to saying some things. >> but they don't say it. >> they don't. >> that's very important. i'm not sure there's a huge amount that is substantially new in what they're saying here that we didn't discuss and everybody discussed, all the investors at the ipo knew about and we discussed with jack ma. david traveled to china to talk to jack ma, a lot of that interview was about trust. in the article he talks about jack ma's undeniable magnetism
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and salesmanship and beguiling vision of the future. this is jack ma's response. >> people challenge us. alibaba bigger than amazon? alibaba bigger than ebay? trust the young people. they are making things changing, innovation every day. all the consumers are the same. they want new things. they want cheap things. they want good things. they want unique things. if we can create this thing for consumers, they will come. >> that is not to say, of course that barron's may have caught the mood of the market or tipped the mood of the market in publishing an article like that. in hindsight, down the line, people may say, ah, it was the barron's article that turned the tide. i'm not sure it's hugely news. >> when you finish it, you're left uncomfortable about the company. that's why they had to come back so strong. >> the central argument is that -- because of the competition, fundamental valuation should not be where it is, it should be changed to
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where a valuation of ebay is in this country, they say, no. >> they also suggest that the numbers that they claim that the chinese are spending can't necessarily be true. right? they say, okay, this is the gdp of the u.s. this is the gdp per capita of china. this is what they claim the average chinese person is spending versus the u.s. person. it just doesn't -- it strains -- alibaba says the data you're using is not correct. the surveys you're using are not correct. >> it's always a black box. you are buying a black box here. >> sure. >> a lot has been written about the corporate structure and corporate governance and the various ties between business units and managers who run them. that part didn't seem new. i sat next to the reporter who did the story for six years when
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i was at the journal, he is no -- he knows his way around a balance sheet and an income statement. but i would argue that barron's job is to provoke and take a point of view. certainly what they've done here. >> for sure. >> and alibaba is taking it seriously with not just the response but the conversations they seem to be having. >> have we gotten an early indication on the stock and whether or not this will push it lower? we'll see when the open happens. >> speaking of the open, coming up, art cashin on what to expect from today's trading session. first one of the week. clearly a big week with the fed as we count you down to the opening bell. look at the futures. a flattish open despite the fact that china sold off this morning. here at td ameritrade, they work hard.
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♪ >> just about seven minutes to the opening bell. let's get to art cashin at post nine, director of floor operations with ubs. good morning. >> good morning. >> people are saying let the pregame begin. we've been waiting for this showdown for so long. your expectations, i imagine, are unchanged for thursday? >> and i have new company. the international settlements came out and suggested they not hike. that's the world bank, imf, former treasury secretary, a big crowd on my side. >> hsbc's point this morning is don't be surprised if they don't move, as you say. but that they add a press conference in october or something people haven't thought about much. possible? >> anything is possible. they -- they also did say that a
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press conference was not necessary to a rate change. so -- >> though you would argue it helps. >> i think they'd have to explain to people where things are going. >> more importantly isn't the central thought you have to tell people, yes, we're hiking rates but we may not hike for a long time. that's the deal they get out. they need a news conference to say that, don't they? >> yes. but we may, rather than we will. they want commit on hiking rates if some things change, they are supposed to be data dependent. so they may have to change. you have people saying not only should they not hike rates, they should begin another qe here. >> on that note, what -- what happens if they do? volatility? can the markets handle it? what happens? >> i don't know.
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i would look to the emerging markets. they look to be particularly vulnerable. we'll see what would happen there. >> the bank of international settlements focussed squarely on that and raised concerns about what's already happened saying this is just the beginning of the tremors. are you worried about some spillover effect in the emerging markets and what it could do to the u.s. markets? >> think back to the late '90s. that's what we saw then. whether it was the russian ru e ruble, that led to long-term capital management. there are spillovers here that are potential. while you can argue that our recovery is moving along, that's not true in europe. that's not true in other places. >> but you do speak as a person focused on risk assets, wanting to protect that asset base. the economists, though they're less in favor of a rate hike -- those purely focussed on what it
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good for this economy. >> i agree with you, but the fed has to look at what's going on in europe with the refugee situation coming in. that could turn things upside down. >> really? the feds won't hike for refugees in europe? >> if they think europe will become destabilized. now even germany is closing the border. they realize the high cost that they're going to be facing. if they can't actually seal these borders and not every nation can, i don't think the refugees are stopping. >> you start the forecast looking at 1 million migrants -- >> letting them in led to more. the more you let n the more will come. >> i just got a note from my cousin, he's doing well. i'm going after him. it's that kind of thing. >> art, we'll see you later today. the opening bell, 3 1/2 minutes away. it's more than the cloud.
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you're watching cnbc's "squawk on the street" live from the financial capital of the world. the opening bell in a little less than 30 seconds as we kick off a week with one major headline. that's going to be the federal reserve on thursday, two-day
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meeting begins on wednesday. then there's the statement in the press conference, will they move off of zero rates for the first time in six years. we'll find out. there's the opening bell. the s&p at the bottom of the screen. at the big board today, modesco, and over at the nasdaq, mere yacmiriad genetics. >> alibaba and apple, the two big a's, we'll see how they open after their statements about sales. >> yahoo! today, sun trust, bob peck says the worst case scenario is already being priced in all these executive departures we heard about. the chief accounting officer
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leaving the week prior to last. in addition to all the alibaba news. the complications with the taxes. b been a miserable couple of weeks for corporate management at yahoo! >> we get around to this finally, and, i don't know, watching all of this is frustrating to watch. >> let's mention one of the positive moves, apple in the wake of that statement that they felt as a result of the first weekend preorders they will match what they were selling last year, 10 million. the preorder period this year around was longer than last year. it's also worth pointing out that though you hair a lot of bearish talk about apple, it's on slowing growth in iphone sales. it's not that iphone sales on the new itteration of the s will
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be less, but they continue climb as fast as last year. >> a negative print on iphone units is a base case for analysts looking at the december quarter, selling fewer phones than the year before. that's the worry to some. >> that wasn't -- my impression was that they wrere expecting 4 million sales. >> there's a bet with me, if iphones go negative in december, he eats miss tiy tie. >> wow. >> what do you do? you don't do anything? >> wow. how do you get that? >> wow. >> keep your eye on the transports and biotechs. last week was the best week for the transports since july. not a huge surprise when you consider what oil has done. we had goldman coming out saying oil could go to $20 a barrel to flush that supply out.
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biotech up 4% last week. the best week since july. various biotechs close to the top of the winner's list today. and semis have had a good run here. >> some of the basic resources are lower. but the -- slightly lower but the main takeaway from the open now would be that it's relatively flat despite what was happening in china. last week you had volatility in the market. that's not evident at the opening today. despite this is the week the federal reserve will decide what do with interest rates. >> my real day job is chief international correspondent. in my world the greatest question now is is there a storm, an even greater storm coming to the emerging markets or should you be buying in places like latin america who have gotten hammered far worse than the united states. after the bank of internationals
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statement over the weekend, you have to be worried. >> or not. you may reprice currencies and emerging markets, but we'll be fine. and we have been fine. >> as an individual sitting here deciding what to buy or sell, do you get into em or don't you? regardless of what you think of the u.s. market. >> if you weren't an international correspondent, do you think the more interesting question is energy? whether that will pick up? >> it's a parlor game in my family to look at oil stocks with the highest yields and say which one will preserve that yield? because if they hold f they can keep paying those dividends, boy, you'll make money right now when you have high yields, you have high risk. >> and a lot of private equity on the side. >> waiting for a real fall-out, real wash-out so they can buy stuff in bankruptcy. >> worst dow components, procter & gamble and exxonmobil and
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chevron. >> what's the yield on chevron now. >> continued discussion about the sanctity of the dividend of those companies. some weighing in saying those concerns are priced in gopro up a couple percent here on a tepid tape. the journal argues that the stock is finally a bargain. i didn't know this, q4 not surprisingly 40% of annual sales forgo pro. >> for christmas, of course. big gift. >> do you have one in the caruso household? >> no. >> shyou should get one. >> we use them a lot in the field. >> as a family. >> no, no. reporting. i feel like i get my gopro experience. >> a drone christmas for you then. >> yes. >> finally on the airlines, i'm not sure if this will get anywhere, american airlines, the "washington post" reports, accidentally flew the wrong plane from los angeles to hawaii back in august. that's a violation of faa rules.
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because the plane wasn't allowed to fly over water. >> yes. they realized the mistake about halfway. >> what do you do? you're over the water. >> it's a logistical, i'm sure, nightmare to make sure the software is coordinated with the flights. >> i didn't realize we divided the fleets into those that can fly over water and those that can't. i'm not sure i want to be in a plane that can't fly over water but can fly over parts of this country that's big. >> i don't know how that -- the yield on chevron, 5.6%. i mean -- >> nice payout. >> yeah. >> let's get to bob pisani on the floor. welcome back. >> it's good to be back. in fact, i was a week in london. you think people from outside the country are buying new york, you should be in london for a week. look at how things are moving over there. down slightly, i did spend some time talking to people about the european markets over there.
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let me tell you something, it's one of the most dynamic cities i've been in. it's a very different city than 20 years ago when i hung out there a lot in the '80s and '90s. sort of insular city. it's changed now. property prices are through the roof. i don't know how anybody can afford to live there. here's some things i just paid for in london. simple fish and chips off the market, off a stall, $16. point of bitters, $9, $10. a subway ride depending on where you're going, $7 to $12, 13 dollars. one of the only bargains was uber. given how dynamic london is, i'm surprise the stock market is not doing better. other than greece, it's the poorest performer for the year, down 7.2%. that's the ftse 100. so, terrific time over in london. over in china, interestingly,
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sh shinzen is down 6.7%. part of the concern is the retail sales were good, but industrial output missed forecasts. fixed asset investment rate of growth, how much they're spending on things, slowed to the lowest level in a decade. base metals are again down today. that's not good for companies and countries that import commodities into china copper, zic zinc, aluminum down. the weakest sectors today, starting at the new york stock exchange, not surprising are in energy and materials and industrials. that would have been the seblcts impacted by the china news. alibaba opened down 2.6%. a lot of the comments from the china watchers that i saw were offended that they got a few points wrong, like the fact that he's the chairman, not the ceo
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in there. a lot of knit picking on the points. stock down about 2.6%. about 3 million shares now. let's talk about the fed and where we're at. it's boiled down two choices. at least everybody down on the floor has two choices, one and done at this point. raise once then declare they'll wait for inflation to get close to the target or don't raise rates now, but strongly indicate they're on track for later this year. one and done eliminates the uncertainty and allows the fed to do something they want to do. by say thing they'll wait, it m implies they're not going to do anything for the rest of the year. the advantage of not raising rates means it will not surprise the markets. a very large group of people think the markets will react negatively if they don't do anything. if you look at the vix, the volatility index, it's been
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coming down. the near-term contract is not implying there will be a lot of volatility in this particular week or the couple of weeks immediately after. this price is in volatility 30 days. 30 days from this point. so, it's been coming down. interestingly, if you look further out, if you look at the december vix contracts, those, too are coming down. so right now the market is implying that either way the fed goes, whether they raise rates or do not raise rates and imply they'll do it later in the year, the market is not expecting a tremendously volatile reaction. that's interesting. that could change suddenly. but so far -- i was just over in the other room there where the options trade, they were not reaching for protection ahead of the federal reserve. michelle, back to you. >> the fed, the fed, the fed. thanks. let's go to the bond pits. rick santelli is there.
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what are yields doing? >> tell you what, really be hard if you you didn't realize that thursday was the big day, the first tightening since '06? just to look at the markets. if you look at tens minus twos yield curve spread there hasn't been a huge amount of movement. it's been mostly flat, hovering around the mid 140. not a lot of clues here. in you look at 30s minus 5s t had generalized steepening and now flattening. as of late it's been mostly sideways. let's look at the two-year, been so much attention paid to the short end for clues. i'm sorry, i don't care how big a magnifying glass one gets to look at this chart we see that we couldn't get above the 74 level on a closing basis, been there, done that several occasions. and there's consolidation. yes, at the top of the yield range, but let's be fair here, it's 70 or 71 basis points, how
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far are we from unchanged at 66 basis points? if you look at the other extreme, 30 yield bonds, let's keep all of these charts since the beginning of july to get context to the trade, we can clearly see if the 30 year was giving you clues, the only clue is that it settled at 275 and is hovering around 290. yield is higher, but action of late looks very well defined by that settlement. see that one spike there? 2.72, 2.73, it held settlement. it is somewhat in the range. it did get out of kilter for a while as we saw boone yields pop. july 1st clearly shows you around the mid 60s is where it seems comfortable. the last chart, the dollar index. if the markets or investors believed a tighten was imminent or normalization was imminent t should look better. what is the fed going to do?
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i don't know what they should do is get more rules based so the market has a better idea. simon, back to you. >> thank you very much. in the meantime, there's one asset class that may be moving on china, it's the commodities. jackie deangelis is live at nymex. >> crude oil seeing a 60 cent decline. trading at 44.05 now. near session lows. these fears about china's gdp on are traders minds. watching the dollar, a little stronger today. that's having downside pressure what will the fed do? that will impact the dollar which will impact crude. last week's factors are still on the radar. you had goldman sachs saying it's not a base case but that $20 oil is popular. people are still mulling the possibility of that. coldman, of course, saying it's a supply/demand problem and that storage space is filling up. it shows there still is a supply problem. back to you. thank you very much. when we come back, apple
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getting a lift as the company gives an upbeat assessment for preorders of the new iphones. will it last? that and a lot more on "squawk on the street" with the dow now down about 56 points. ♪ ♪ it took serena williams years to master the two handed backhand. but only one shot to master the chase mobile app. technology designed for you. so you can easily master the way you bank. the 306 horsepower lexus gs. experience the next vel of performance, and there's no going back. lease the 2015 gs 350 with complimentary navigation system for these terms. see your lexus dealer.
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this just in: 50 million customers' data was not compromised this morning in a security breach that didn't happen. wall street. not rattled. at all. no. not at all. not at all. i mean, look at the day. sir. sir. what went right? what went right? everything. thank you. with threat intelligence, behavioral analytics, and 6000 experts, ibm security will help keep you out of the news. my dad's company wasn't hacked today. cool.
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. airbus taking a large step in becoming a true global manufacturer by opening its first final assembly plant in the states. phil lebeau joins us now with the ceo of that company. >> another first on cnbc, wi standing in front of the airbus, how much of a difference will this make for airbus as you break into the backlog of planes that you have? >> first of all, we need to increase production and we need this assembly line to contribute to it. the first goal is to produce four aircraft a month at the end of 2017. >> this is a big challenge. >> then we want to be global player.
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we need a strong industry footprint in the biggest market, america. we did it in china a few years ago, it was a big success. >> how much does the nonunion work force down here help in terms of your cost for manufacturing here versus manufacturing airplanes in europe? >> at the beginning we will have to go through a learning curve. so it will be more expensive as we transport parts from europe. but we believe that in a few years we will be in the same ballpark. so it will be a cost efficient assembly line from 2018 onwards. >> you have 40% of the market share in north america. i know would love to be up at 50% with boeing if not passing them up. can this plant help do you that? give you a strong foothold in north america? >> i'm sure it will. the airbus market is a leader with about 60% share.
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we made good improvement in america from 20% to 40%, but i believe we should achieve 50%. with the assembly line like that in mobile, we're creating jobs, value in america. getting closer to our customers, to our american suppliers. this is the value which sometimes makes the difference. >> what you are hearing back from airlines in terms of how quickly they are retiring their inefficient or less fuel efficient aircraft and how quickly they're saying to you we need it faster, even with low jet fuel prices, we need the more fuel efficient planes. they are now very profitable thanks to the low fuel price. this is now the time for them to invest. to prepare for the future. we're cueing up on this. i need to ramp up production even faster and we are studying this. this is a bright future for mobile. >> the first one comes out next spring, full production in 2017? >> yes, absolutely. >> we have a producer back there who loves the s.e.c. and
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football, give me one roll tide. >> roll tide. >> see, he's learning thousand speak alabama. >> good stuff, phil. thank you very much. when we return, apple on the rise after strong sales numbers. we will talk to a top analyst about how to play the stock, more "squawk on the street" will be right up. it's intelligent enough to warn of danger from virtually anywhere. it's been smashed, dropped and driven. it's perceptive enough to detect other vehicles on the road. it's been shaken, rattled and pummeled.
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shares of apple are moving higher on new that's company says it on pace to beat last-year's iphone preorder sales for the first weekend. early reports suggesting that the iphone may be selling out in china. for more, let's bring in or expert. when apple says we are on pace to beat the 10 million unit first weekend record when the iphones go on sale september 25th, what does that mean to analysts like you to where the market thinking they should be? >> to us that means reality is better than the fear that everyone has had on the name so far. last year they did about 10
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million iphone sales in the first weekend. this was something suggesting not that. 12 million is a reasonable expectation. >> the data is based on inventory positions in china or wait times displayed to retail buyers. when you see apple suggesting we're trying to catch up and respond to that as quickly as we can, do you take that at face value that the data out of china is a fair reflection of standard inventory letters or could they be slightly distorted? >> you know, i imagine it's a fair level. if you look at the last quarters, june quarter, 60% of incremental revenues from apple came from china my point being apple had to position china, and the fact they're sitting at two to four week lead times already
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in china and cross the world is suggesting demand is a lot stronger than people expected. >> this website takes screen grabs of wait times and says, okay, three to four weeks, that's a long time. that means sales are good. you're confident that's a decent methodology for assessing how it's going there. >> it's comparable to what you see in north america and europe. you get on the apple websites, it's been a link to how much inventory they have. the question is are all the orders purchase orders? has someone put out financial information, credit card down to get it, or soft commitments to get it. that's unclear candidly and that's what everyone needs to figure out. barring that, numbers sound positive. >> year to date, apple stock is up 5%. trading 9 times earning if you strip out the cash pile. is it a buy, amit?
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>> we think so we think the stock works towards 150 over the next 9 to 12 months. not only do you have good demand, the second point i would keep reminding people about is the s cycle has higher growth margin for the company than the regular cycle. so you see better margins, better free cash flow this year. why is that? why does the s have better margin? >> you know, typically you think about t when they went from 5s, you had a different casing to work with, a lot of inefficients to ramp up with. when you go from 6 to 6s, better learning curve, better efficient sis in the manufacturing process. >> aren't we also taking down the original price of the 6 and 6 plus by $100 that must hit margins. >> that would be a negative impact to margins, but not too different from 12 months ago
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when 5s and 5 were coming down $100. >> thanks for getting up early, amit. nice see you. amit daranani joining us. when we come back, mohamed el-erian on the fed. we're back in a moment. o put in my 15-year notice. you're quitting!? technically retiring, sir. with a little help from my state farm agent, i plan to retire in 15 years. wow. you're totally blindsiding me here. whose going to manage your accounts? this is a devastating blow i was not prepared for. take charge of your retirement. talk to a state farm agent today. big day? ah, the usual. moved some new cars. hauled a bunch of steel. kept the supermarket shelves stocked. made sure everyone got their latest gadgets. what's up for the next shift? ah, nothing much. just keeping the lights on.
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. good monday morning. welcome back to "squawk on the street." i'm carl quintanilla, with michelle caruso-cabrera, sara and david are off today. look at the markets. quick trip down, some 82 points off of the dow. coming off the dow's best week since march. the s&p down about 5%. oil has lost a little ground, down almost a buck. >> here's our road map for the next 60 minutes on cnbc. markets to a certain extent in limbo ahead of the big fed meeting this week. mohamed el-erian will join us live momentarily with his take. and alibaba under pressure after
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barron's says the stock could fall another 50%. alibaba is fighting back. and jpmorgan's chief asia marketing strategist will join us. as simon said, we'll begin with the markets. after weak data from china over the weekend and as wall street braces for the fed decision this week what do investors need to know right now to protect themselves? joining us from allianz is mohamed el-erian. good morning to you. >> good morning. >> some people said with the mets and the jets, maybe mohamed's dark view might be lightened a bit. then i see you tweeting about the greek elections. what do you think? >> we are in the midst of the change of the volatility paradigm. all that means is that central banks are less able to repress volatility. that's something that markets have to price in. in regards to thursday, it's too
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close to call. the big question is not whether they'll hike or not, the big we is why are we so obsessed with a single hike. that says a lot about how codependent markets and central banks have become. >> you are suggesting that we shouldn't be obsessing about it or that central banks have an incredible amount of power now? >> so, first, michelle, we should really be looking at the journey, not the first stop, if you'd like, not the first hike. the journey is the loosest tightening in the history of the fed. they'll go very gradually. it's going to be stop and go. and the terminal point will be well below historical averages. if we were to look at the journey, we would obsess much less with the fed. you're right. it is because we think that central banks are so powerful that we absolutely obsess with every single statement, every single measure. but in reality there's something much more fundamental going on.
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that is a repricing of economic conditions around the world. >> my question would be so you say on the one hand that the central banks are not able to repress the financial volatility that we've had, we're codependent. the central question has to be in this environment, does the multiple of which the market trades what people are willing to pay for a given stream of earnings on the stock does that fall because people have less confidence? i'm not sure if you've seen what we got today in the financial times whether it's a suggestion from robert shiller that we may be in bubble territory. he's a behavioral economist. he's looking at surveys to the point that you're make being what people are thinking more than anything else. >> yes. if you buy into the notion that we are transitioning to a higher volatility regime, then by definition a few things happen. one is that peoples asset allocation becomes too aggressive. why?
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because we have to change the underlying assumptions about the volatility of markets. secondly, multiples start looking high. so, yes, there is a transition. the good thing for investors is when these transitions happen, markets typically overshoot, typically there's too much contagion, too much correlation, you get value that pays you over time. michelle was right earlier today saying emerging markets, it's happening in front of our own eyes. the question becomes at what point, you go in. we're getting some real overshooting. >> but as far as we're concerned in this market, have we seen that yet? have we seen the correction in response to your argument yet or is that still to come? >> i think it's still to come. the reason why it's still to come is because we're not handing off from central bank, artificial growth to genuine growth. the global economy is still too weak for that handoff. so, we have some bumpy -- we
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have a bumpy road ahead. i keep stressing it will create a lot of attractive opportunities, especially in names that are used as the atm for this market. we saw that a few weeks ago. >> what is the sign that we have moved past that codependence? every day there's some headline from the boj, boe, ecb, the fed, new zealand for that matter. but what's the clue that we have learned to stand on our own feet then? >> not just new zealand, sweden. the financial times has a whole thing on the swedish central bank saying i can't do it all, guys. i simply can't do it all. the signal will be when markets start looking beyond central banks and start pricing in the fundamentals. i think we are getting closer to that. but it's taking us a long time. rightly so. because, after all, central banks have been the market's best friends. they have always come in at any sign of volatility.
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>> you first came to prominence in the emerging markets when you were running pimco's huge emerging markets fund. we have seen incredible carnage in latin america due to currency and the underlying stocks getting hammered in a way that americans can't even imagine. the volatility in the u.s. has been bad, but they haven't seen nothing. are you dipping your toe anywhere in those areas of the world that have been hit so very hard? or is there -- the bank of international settlements over the weekend made it sound like there was a bigger storm to come. >> i discussed this, michelle, with you, with simon, with carl. there are two markets fundamentally unhinged. emerging markets and oil. opportunities are being created. as to whether you go in now -- it depends on your horizon. if you have no exposure, a 5 to 10-year horizon and you can live
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with the volatility, start now slowly. but if you already having exposure, wait a bit that will be a more attractive position. there's people stuck in those markets looking to get out. we'll look back on this. this will be a very attractive stage. one of these things that happens once a decade that emerging markets go through a fundamental repricing that overshoots, and that creates the potential for returns over time. be careful, it will be incredibly volatile in the next few months. >> this point of view that some have that the fed will move this week and that equities will like it. the point of view out of jpmorgan. is that too glib? is that speaking to peoples frustration? >> i think there's something to be said for dealing with the uncertainty and getting it out of the way. if the fed were do the following, which i do not think they will do, if they were to say one and done -- i don't think they'll do that, but if
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they were to say one and done, the equity market would take off. i don't think they'll do that. i think as policymakers they need to keep options open. you can design a few responses from the fed where they hike but the equity market likes it. >> it's right and prop their a man who works for allianz would stress the investing opportunities still to come down the line from the correction that would happen. would it be your advice, given the scale of opportunity in the future, for people to move into cash now to a greater extent to make opportunity to buy further down the line? in both areas that you talk about, what's happening in emerging markets and is ongoing if i'm paraphrasing incorrectly, forgive me. >> you heard me say for months now become more barbelled. take money out of the public markets, put most of it in cash. take a little bit of it and start up opportunities,
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especially in new tech. you know, i've been arguing for bigger cash balances for a while now. we've had a bit of the repricing. i would say the most important thing is the behavioral side. ask yourself how do you behave when volatility spikes? volatility will likely spike. do you end up doing the wrong thing at the wrong time? unfortunately quite a few people do. if you are worried about that, then, yes, accumulate cash now. but i tell you, it's not as compelling as it was when you and i were talking about this a into mont few month ago. >> if you think volatility will spike like a lot of markets do, they bring down their risk levels. doesn't that by definition mean more selling? >> it means more selling, but the trouble is there's already some attractive pricing. let's not forget there are positive elements. carl, i'm not just talking about the jets and the mets, but the u.s. economy continues to
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recover. this is real. let's not forget that there's some massive innovations going on in the tech sector. let's not forget that companies have a lot of cash they can put to use including through higher di dividends, through share buy backs. there's a lot of positive things going on in the u.s. market. that's why it's no longer a slam dank as it was. yes, volatility will go up. yes. some people will sell. but focus on where value is being created. >> finally t looks like you have a quarterback that can throw and a running back who can run. will this last? >> i don't think so, carl. even yesterday, okay, it looked bad in the first half. but, you know what? they showed grit. incredible resolve. i was proud of the jets yesterday. that was a really good second half performance. >> we haven't had an other like that for a while. we'll see you next time. thanks for coming by. >> simon, you have picked up the
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american football love? american males by definition love football. >> you were there, weren't you? >> no. i watched it on tv, you know. i guess that's a no. coming up, just under a year -- >> i was on a beach . >> alibaba is trading below its ipo price and barron's says it could fall further. another 50% to be exact. and apple saying preorders for its new iphones are on fpac to beat last year's sales.
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apple trading higher today after the company says preorders for the new iphone are on pace to beat last year's record. josh is live in san francisco with details on the numbers. josh? >> this morning investors really getting their first real indication of consumer response to the new 6s and 6s plus. customer response to the iphone 6s and iphone 6s plus have been extremely positive and preorders this weekend were strong around the world. we are on pace to beat last year's 10 million unit first weekend record when the new iphones go on sale on september 25th. demand for the 6s plus were extremely strong.
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apple saying it's working to catch up and that the company will have 6s and 6s plus units available in stores when they open next friday. apple skeptics have said apple h do does not have a growing market. we have this report from recode where they looked at this inventory website this website blog that looks at preorders, and whether or not -- how long is the wait time? in china, this is specifically about china, they said the wait times in china suggest that the phone is selling very strongly there. even though apple wasn't specific in their statement about china -- >> you have to point out that apple is a sophisticated company and knows they'll do that it's
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not beyond the realms of possibility that they want to put a positive spin on the first weekend of reporting by playing with those numbers. >> i see what you're saying. >> that pr statement they say, hey, we noticed the backlogs, we're doing our best to catch up. if you're going put that up there, you should say that. >> alibaba under pressure of a barron's story saying the stock could fall another 50% from here. the company strongly refuting the article with a letter to the barron's editor. morgan has more. >> alibaba has gone from market daryling to market pariah. barron's has predicted another 50% drop. we're down from the high of 120 hit last november. shares are trading below $63. about 7% less than the $68 pr e price.
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the company went public in a nearly record public offering a year ago. what's weighing on the sfok? the e commerce giant that faced disappointing earnings, skepticism about its corporate structure and slowing china growth. alibaba said the total amount of goods bought on its platforms will be lower than it initially expected, that's after the growth rate of gross value merchandise slowed after last month's report. the share of major blocks of shares has had an effect. the company has another stock lock up expiration the end of this week when 1.6 billion shares become eligible for sale on september 20th. all of this fuelling that bearish cover story from barrons this weekend. in response alibaba published a letter slamming the story saying it contains factual inaccuracies and selective use of information. you can read the five-page response on cnbc.com. investors are reacting to this
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report. alibaba down nearly 3.5% and it's weighing on yahoo! who has been looking to spin off its stake in alibaba. shares of yahoo! down about 3% as well. >> we got the letter here. five pages long. incredibly detailed. the company clearly felt like they had to make a huge response to barron's as a result of that article. >> yes. that's right. >> okay. >> the central question here, we were discussing this in the first hour, the central question is whether there's new material in there that people were not talking about at the ipo. the complex structure, as to who owns the assets and how the profits come through, a very in the weeds discussion about fair comparisons to make, and more importantly the main point that barron's makes is that it shouldn't be trading at this multiple, it should be trading at a lower multiple like ebay
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does in this company. central to the discussion is the question of trust. jack ma regularly speaks to david faber. not long ago david asked him about the question of trust this is what he said in response. i don't really care if you trust me do trust my team. >> trust is transparent. we have 30,000 smart people. if you work with smart people, you have to be transparent. you have to make sure they trust you. you trust them. making sure everybody has the same vision. i don't care if you trust me or don't trust me. i care, my team trusts me. and my customers trust us. if you can do that, whether shareholders trust me or not, not important. they know -- they trust the good result.
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>> in fairness, since that interview was recorded, he's been quite harsh on his own company saying we're not performing as i expect you to be. >> one other core criticism from the article is they question the growth assumptions. bottom line. about whether or not the company can aftchieve the numbers they' talking about. if you own the stock, you have to read the article and response for sure. coming up, big oil stocks falling sharply in the last two months. hurting from oil's nearly 20% decline in the same period. you should be playing these stocks now? that's after this break. my name is watson. i'm helping doctors keep people healthy. take ted here. i'm pulling together data he shared from his wearables, health records and family history, so we can analyze it.
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one area of the asset markets clearly under pressure today is commodities. i'll prices falling once again this morning on the weaker than expected chinese data exacerbating concerns about a global oil glut. crude oil prices have fallen almost 60% since june of last year. joining us now on the phone is doug terreson. welcome to the program. >> thank you. good morning. >> a lot of people will be surprised that oil is falling today given we have this report
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from the iea at the end of last week saying the saudi strategy was working and that oil production from nonopec countries could fall by a half million barrels a day next year and 80% would be due to less shale production in this country. can you explain what's going on today? >> sure. first of all, you're right. the down side risk have outweighed the upside potential. but the data from friday and from opec today indicates that while oil prices appear to be methodical and that opec strategies. on demand, expectations have been revised higher by nine months and a whopping 50%. on supply, while some maintain u.s. shale would be resilient, it would lower oil prices, the negative revisions have been
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significant, u.s. shale production seems to be following a four to five month lag and total opec supply will decline by its greatest amount in 24 years in 2016. >> you can help us pick through the big names in this country, those shale operators in this country where presumably it could be a bin dominguary resul? >> i think there are always going to be winners and losers. some companies have better positions than others. we think that one of the defining features of this current period will be that we'll have a consolidation phase in the industry, which is typically a salient feature of every market downturn. if that unfolds it's important for the oil market, as we learned in previous decades, it concentrates capital and resources in fewer and more disciplined hands that leads to more measured growth and supply, that might be the linchpin opec
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needs to take its foot off the pedal in the current downturn. >> conocophilli cophillips, 6%. hess is less, less than 2%. should i stick with that or something safer and still higher than what i can get in the treasury? >> we don't think those divide d dividends are at risk. we think those dividends are safe. we think con cophillips is safe as well. we think this will lead to better total return. conocophillips is safe here. >> so, what names are you recommending? >> so, conocophillips and hess are the favorites. we think both of those companies represent attractive total return, well managed entities.
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we think we're within a quarter or so of the bottom of prices. >> as you go down the scale on the second tier, the third tier, give me some other names. >> it's positive on eog and pioneer. those are companies with fantastic resource positions. well managed. but at the same time we also believe that with the -- if the oil price remains near current levels during the next 6 to 9 months, we'll see consolidation in that area. and, you know, continental resources resources appears to have compelling positions. >> thank you, doug. doug terreson. straight ahead, how the slowdown in china is affecting companies in the u.s. adrian mowat will join us. the dow down about 48 points. i'm here at the td ameritrade trader offices.
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. nearly 500 homes have been destroyed by fast moving wildfires in california. one person was killed. some 75 square nimiles of land have decision scorched. at least 12 people were killed and 10 injured when a group of tourists were fired on.
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egypt said they we egypt. more than 50 inmates escaping an afghan prison following a coordinated attack by taliban insurgents. the attack included a suicide bomber to breach the compound's walls. four guards and three insurgents were killed. seven others were injured. 84 prisoner remain in jail. mt. oso erupting this morning in japan sending huge plumes of smoke and ash 6,500 feet in the sky. nobody was injured but airlines were prompted to cancel flights. back to you. chinese equities trading lower after mixed economic data the slowdown weighing on things here at home. adrian mowat joins us. good to have you here. give us your assessment of the actual economic data we got
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overnight when it comes to fixed asset investment and retail sales. on the one hand, on the other hand. what's your assessment of the chinese economy. >> the numbers will look back for last month. remember, we had that enormous industrial accident in tianjin which impacted tianjin but also the general flow of trade. it hit the production of cars. we have the extra holiday to celebrate, sort of 70 years of the defeat of the japanese, which resulted in factories being closed down for ten days in order to improve the pollution situation in beijing. so i think there's been some sort of data point here that would have pushed it a bit lower. the story on consumption is also a bit mixed. the retail sales numbers always look okay. the antidotal evidence is a bit more mixed. i would highlight that some of the data out at the auto industry is not quite as bad as people were fearing.
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we continue to see good data from e-commerce and the services sector. >> we're showing shanghai lower by than 2%, and shenzen got hammered. are you bracing yourself for another round of -- that big decline that we can see visually on the screen here? >> well, the other market i would highlight is h shares. msi china -- >> over in hong kong. >> that was up about ten basis point. so what we're hoping will happen here is we'll go back to normal service where we didn't worry too much about the a share market which was in doldrums in 2007 to the middle of last year. and that we focus much more on the fundamentals of the institutionally owned stocks in hong kong. i think what happened with
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shenzen there's an downgoing purge of marginally ending, and that ongoing purge caused a selldown. >> on that note, the bank of international settlements put out their quarterly report. there were 56 million new brokerage accounts created in china in the first half of the year. that is an astounding amount. if you signed up that many brokerage accounts in the united states, every single brokerage firm stock would be through the roof. they suggested that was part of what the problem was and why there was such a huge move up. are we done with that? are people giving up on the stoke after that huge surge? >> look, i think on the a share market it's probably now quite damaged. we went from a bear market from '07 through to june last year, we then put on 120% over a 12
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month period. that did draw in people at the last minute who are now nursing losses. i think there's a damage done to the onshore market. the offshore markets, i think, can do fine, valuations are very low. we're almost at ten-year lows in terms of price to book pe. the earnings structure is actually quite good in the off shore market. come november it will be a quarter e-commerce companies. we're seeing great growth in insurance premiums. some of the industrial names are doing well, mparticularly the airlines. the key is to stop looking at "a" shares and look more at the hong ko hong kong h shares which are sitting in clients portfolios which have institutional exposure to china. >> adrian, we should point out to people that you're joining us
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today from malaysia you spend a lot of time in china and beijing. it's a luxury to have you on and to view this country's actions through the lens of someone in asia. if the fed raises rates this week, what will that mean for your markets and where do you think the opportunity will be? >> i'm in a muslim country. i can't say we'll be popping champagne corks. i actually think it's going to be a great sense of relief. just get on with it. you know, our most recent publication on the outlook across asset classes and emerging markets was just asking the fed to move. i think the psychology around the central bank not moving since november of 2007, when the macro economic data is very strong, in particular when we look to those vacancy data points from last week, is a problem, is an issue. when that moves will you see
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short covering. we have record short positions, you know, across the board in all assets in malaysia. >> sure. if >> if we look at the mexican peso, record high short positions. i think this is going to be a rally on news story because the short positions are so big. >> how much of that is based on what you think the fed should do and short-term trading against what we continuously are told there are long-term problems with many indebted corporations and countries in asia who may find it difficult to service that debt, particularly if the particular rises. >> look, i think there's a narrative out there, certainly debt to gdp has expanded throughout em. it does remain at a lower level than you will find in the developed world. when you look at the details, interest rates are being cut in places like korea, taiwan,
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thailand they're less than 2%. even in malaysia we're looking for an interest rate cut here. remember, there isn't an inflation problem in the asian region. the central banks are actually welcoming weaker currency as part of the stimulus. and they're adding to that by cutting interest rates. the big lesson from the asian financial crisis was to minimize your dollar debt and, so, yes, we have large foreign ownership of the bond market but the foreigners have taken the currency risk here. there may be a thinking that these currencies are a bit oversold. i hear the narrative, but i think it's kind of played out and may be overdone. >> got it, adrian. thank you very much for joining us on the phone from malaysia. coming up on the program, billionaire mark cuban shot across the bows at donald trump and hillary clinton. it has a lot of people buzzing today. "squawk on the street" will be right back.
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i'm brian sullivan. six stocks have seen a surge in short interest in the past two weeks. what has the bears worked up? more "squawk on the street" next.
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could more billionaires be lining up to fight their way to the white house? mark cuban is not ruling it out and he says he could win against donald trump and hillary clinton. >> mark cuban says he has no plans to run for office but is clearly a guy who has been inspired by the donald trump presidential campaign. he said he admires trump and what he has done on the campaign trail and making it clear you don't have to have a perfectly pristine background to run for president of the united states. i talked to cuban through e-mail about this. here are a couple comments he gave me. he started off by comparing
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himself to hillary clinton and donald trump. he also said that if we have a three comma potus, it would not take long before the office humbled him or her. that's despite the arrogance that billionaires have and the confidence they have to run for office. he said if he ran as a dem, i know i could beat hillary clinton. if it was me versus trump. i would crush him. cuban has gone through so far as to think through what his campaign platform would be. telling me he doesn't want to focus on social issues in this country. he said those are issues for the family, personal, private decisions. his key issues are income inequality, college debt, overly complicated taxes. and he's concerned about cybersecurity and broken equity markets. he said the equity markets and stock markets in the country have been taken over by hackers. this raises a questi s s a key me, how much has donald trump's
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campaign inspired other billionaires to consider running? >> a talk of bloomberg running. there's a draft bloomberg effort underway right now. >> it's obvious to everyone, probably, but three comma potus, you need three come makocomes c describe yourself as a billionaire. >> so bloomberg could run in 2016? >> i think you would have to check the filing deadlines to be honest with you. >> thank you. one comma ameamon, we love you. i don't want to ask how many commas you got, rick. >> michelle, let's look at the fed and how many commas they're trying to push out here. i'd like to welcome my special guest, matt maley.
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thanks for taking the time this morning. >> great to be here as always. >> you know, i always like to listen to the lead-in. the lead-in is mark cuban talking about issues. he doesn't want to talk about social issues, he wants to talk more about economic issues. i can understand that. when it comes to the fed, isn't is the same problem? the issues we're talking about are normalization. is any of this normalization going to actually help the economy and has the issues we're normalizing from actually helped the economy? your thoughts? >> well, they are not really dealing with the issues that are important to the market now. we have 2% growth or 2.5% growth on an annualized basis. that's good. that is growth. but we're still in the worst recovery in a post world war era. >> listen, mark cuban said that, you know, none of these issues are being dealt with. i understand that. we have a central bank that is
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doing things we don't know the exact costs. we have calibrated the economy, the treasury market, everything on a much smaller scale in a time when we might need big scale. in the end, what is the fed normalization going to continue to do to risk assets and what will happen if they don't do anything thursday? >> well, to be honest with you, obviously it's a two-part question. the first one, when they normalize rates, no matter how slow they go, they have to go slow because it's going to cause -- if they want normal -- what they've done in the past, it will cause a massive unwinding of leverage. the cost of carrying all this leverage -- which we're starting to see part of -- we're seeing it already. continue. >> exactly. exactly. the thing is people don't realize that putting on that risk that the fed allowed to take place with their reserve policy helped the market go higher than it probably should have gone. now they'll raise rates, that leverage has to come off.
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it has to be unwound. people complain all they want. it's the normal process when leverage has to be unwound. >> you know, i think it's much easier to understand the fed and zero interest rates, lack of growth, when you look at low interest rates as a subsidy. that subsidy is already in many ways priced in. i ask you, forgetting about -- talking about that subsidy, are we ever going to see anybody address what's underneath the subsidy? lack of growth? who will speak to that? >> well, we got to do -- somebody has got do it. in a way, the fed is really giving the government, whether it's the president, the congress, a pass. they've been able to -- remember, bernanke used to say we're just doing this for short-term, over a short-term period of time so the congress can come in and do what they need to do. now they've been doing it for six, seven years, at some point it's got to stop.
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nobody is willing to take that step, make the tough decision. >> listen, matt, thank you. they should normalize, growth will probably falter because it's subsidized, then the onus goes back to the people who make true policy, congress. matt, thanks for taking the time. simon hobbs, it's all yours. >> thank you very much. airbus from europe is making a big bet here in the united states. phil lebeau is in alabama at the company's new plant. take it away, phil. >> thank you, simon. about five or six years ago, if i would have told through will be a plant in south carolina and a plant in alabama building airplanes, most people would have said no way. it won't happen. now we have that with this new plant here by airbus. it's in mobile. it will be building four a320s a month when full production starts in 2017. 1,000 employees. they're about to have the ceremony in a couple minutes. full production coming in 2017. the reason this plant is crucial for airbus is because it has a
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huge backlog, especially of its most popular model, the narrow body a-320. the planes built here are only going to carriers in north america, some of them could be exported from here. look at the growth in orders that airbus has experienced over the last six years. a few minuteses ago we talked with the head of airbus and he talked about the company extending its delivery pace. >> first of all, it's to produce four aircraft a month at the end of 2017. this is a big challenge. then we want to be global player. we cannot be a global player without a strong industry footprint in the biggest market. america. we did it in china a few years ago. it was a great success. this is exactly what you see behind me. >> their plant in china has been a success. hoping to replicate that here. for investors, there's been no comparison when it comes to boeing and airbus over the last
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three years. airbus outperforming boeing, 116% return in the last three years. they'll have the ceremony in a few minutes. a number of airline executives are here. all the dignitaries who are happy to see a plant coming here, this is a. >> are they going be making planes from scratch in this country or are they transporting things from europe. >> they will be making them here. some of the key components will be coming from suppliers in europe initially but like all final assembly plants, eventually all of the components in addition to the fuselage will be built here. so initially some of those key components will come from europe but they will eventually be built here in alabama or in the south eastern united states. >> all right. we will continue to see here in
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t the. coming up, ali bmp aba is not the only recent ipo that is hurting. what does it mean for other companies that are about to go public? we're back after a quick break. good. very good. you see something moving off the shelves and your first thought is to investigate the company. you are type e*. yes, investment opportunities can be anywhere... or not. but you know the difference. e*trade's bar code scanner.
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it's been a rough three months for some of wall street's names. alibaba, twitter and box 24. the volatility is having big implications and the company is gearing up to go public. kathy smith, co-founder of an ipo manager. good morning. >> good morning. >> is this just a symptom of the fact that lesser quality companies come to the market later in the cycle? >> perhaps there's some of that but the main thing is the overall market has had such a severe and fast correction in august on the volatility side. and to price new ipos you have to compare your price to your peer group. to launch it well if the volatility is really high it's hard to launch it.
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you need an extra discount for volatility to get done. only the strongest will be done. >> we're not going to come to market right now. we're not going to get the money we wanted. >> we are not going to know by reading the tea leaves. if we don't see road shows the rest of this week that will mean this september could be the slowest september since november 11. >> do you have any names that people should research and look into that may be coming to market at a good discount that you might determine to be good quality? >> i think the important thing to note and we have done studies of this, that after a dry spell in the ipo market that we're having now because of these points that i just made, after that usually the ones that are done almost all trade very well. so after the facebook ipo,
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the -- a month went by and almost every ipo done over the next month did quite well and those included service nel and palo alto networks. so what we have to see now is the balance of power has to shift between the issuer and the buyer. the ipo investor has to make money and that's how we will get out of this. we will reset and it will be better for ipo investors. >> does this environment favor companies with high prior valuations or more modest ones? >> the higher valuations will be the problem because those will have to be reset quite significantly and i think that is part of the slow down because no private investor wants to mark down their portfolio. it's like selling a house when you thought you were this and you're down here. that will require portfolio mark downs. we expect to see a contraction in liquidity on the private side
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which has been so overfunded. every $10 of private funding, only a dollar coming out of the ipo market. it's a big imbalance that has to be resolved. >> kathy smith joining us there. now let's send it over to john. what are you up to? >> of course we're tracking apple. it's bucking the trend of the dough and s&p 500 and nasdaq down this morning. it is up with some color. and car hacking intel's chief of security is joining us to talk about the troubles in the auto sector coming up on squawk ally. awe believe active management
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good morning. it is 11:00 p.m. here and 11:00 a.m. on wall street and this is squawk box live.

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